Hedge funds plan to dramatically increase their exposure to cryptocurrencies by 2026, new survey finds, in major vote of confidence for digital assets after recent sharp price drops and plans for punitive new capital rules .
A survey of 100 chief financial officers of hedge funds around the world, conducted by fund administrator Intertrust, found that executives expect to hold an average of 7.2% of their assets in cryptocurrency within five years.
If replicated across the industry, that could amount to a total of around $ 312 billion in crypto assets, based on data group Preqin’s forecast for the total industry size. hedge funds, Intertrust said. Seventeen percent of respondents expected to have more than 10 percent in crypto.
This would represent a sharp increase in the appetite of hedge funds. Current holdings in the industry are unclear, but a number of high-profile managers have already pledged small sums in crypto assets, drawn by soaring prices and market inefficiencies they can arbitrate.
Man Group trades bitcoin futures in its computerized AHL unit, while Renaissance Technologies said last year that its flagship fund Medallion may invest in bitcoin futures. Hedge fund manager Paul Tudor Jones bought Bitcoin, while Brevan Howard shifted a small portion of the funds to crypto and his co-founder, billionaire Alan Howard, is a major industry funder.
Bitcoin is the biggest contributor to this year’s earnings for U.S. fund firm SkyBridge Capital, set up by former White House communications director Anthony Scaramucci, which started buying it late last year. then reduced its stake in April – just ahead of the token price. tear down.
Hedge funds “are well aware of not only the risks but also the long-term potential” of cryptos, said David Miller, executive director of Quilter Cheviot Investment Management.
The growing enthusiasm for hedge funds contrasts sharply with widespread skepticism among more traditional asset managers, many of whom remain concerned about the enormous volatility and uncertainty of cryptocurrencies as to how they will be regulated.
âAt this time, crypto investments remain limited to clients who have a high tolerance for risk and even then investments generally represent a small proportion of assets to invest,â said Morgan Stanley and Oliver Wyman, the firm. advice, in a recent report on asset management. .
Some hedge funds remain suspicious. Paul Singer’s Elliott Management wrote to investors earlier this year that cryptocurrencies could potentially become âthe biggest financial scam in historyâ in a letter seen by the Financial Times.
Cryptos have been on a wild ride again this year. Bitcoin rose from less than $ 29,000 at the end of last year to over $ 63,000 in April, but has since fallen back to just over $ 40,000.
While the future regulation of cryptos remains uncertain, last week the Basel Committee on Banking Supervision said they should apply the strictest bank capital rules of all assets.
The Intertrust survey, whose respondents include CFOs from around the world of funds that manage an average of $ 7.2 billion in assets, also showed that all executives surveyed in North America, Europe and the UK expect to have at least 1% of their portfolio in crypto.
North American funds expect 10.6% exposure on average, while UK and European funds expect 6.8% on average.
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